Canadian company Celestial Growth made its public debut today (Dec. 22), listing on the TSX Venture Exchange (TSXV) as a new pathway for Canadian companies to seek funding as they grow.
The company has 40 years of previous aerospace experience with numerous big names, including Blue Origin, Kepler, MDA, Phantom Space Corporation, Boeing, Sea Launch, the European Space Agency (ESA) and the Canadian Space Agency (CSA). It has presences in Toronto, Calgary, Vancouver and Washington, D.C. and affiliations with several trusted partners, listed on its website.
To get a sense of the coming opportunities this listing brings for young Canadian space companies, SpaceQ spoke with Celestial Growth’s directors by e-mail, a few days ahead of the TSXV listing.
Celestial Growth’s mission, according to CEO and director Jared Bottoms, is to “grow the space tech ecosystem in Canada, creating a lasting and memorable legacy in this exciting new sector.” The company does not provide financial advice, nor investment fund opportunities, but seeks to find high-growth new space businesses domestically and abroad “with great management teams.”
Celestial Growth’s team focuses on “helping these companies grow and scale, with direct access to the Canadian capital markets, and particularly public venture capital through the TSX Venture Exchange’s Capital Pool Company (CPC) program.” (More about CPC in a moment.)
While the primary benefit of Celestial Growth is to allow the participating companies opportunities to grow, a secondary offshoot is for Celestial Growth to – in some cases – serve as investors as these companies and to provide access to the principals’ network of partners, or to potential other forms of capital.
“I think what also makes us different is that our team is comprised of an ideal mix of technical, commercial and finance professionals who are passionate and knowledgeable about space, and are doing this because they want to impact the growth of the space tech ecosystem in Canada,” added Tahir Merali, a company director, saying that Celestial Growth wants to provide a platform for Canadians to support space – a “high-growth sector,” in the company’s view.
“Canada’s commercial space sector is full of promise, with 94 percent of all Canadian space companies defined as SMEs [small- and medium-sized enterprises] per the Canadian Space Agency’s 2020 State of the Canadian Space Sector report,” Merali said.
“There are many incredible companies right here in Canada, seeking to be directly or indirectly engaged with our space sector. Combining this with the [2023] ESA and NASA budgets increasing by 17 percent [over three years] and up to 8 percent [in 2023] respectively, other space-faring nations are poised for growth with the opportunities that public investment offers. Canada’s sector is long overdue for its own sustainable growth and stands to benefit from access to diverse financial instruments – and we hope to play a role in doing so.”
The company’s IPO and listing on the TSXV is the first space-tech focused capital pool company (CPC), according to Celestial Growth. (Common shares are listed under the trading symbol CES.P.)
CPCs are somewhat similar to the Special Purpose Acquisition Companies (SPACs) that have been used commonly for IPOs lately, but not completely the same, according to Marek Lorenc, a director and corporate secretary.
CPCs and SPACs both are non-operating shell companies that exist to raise capital and to list another company on a stock exchange, “with the sole purpose of identifying a target company with which to complete a reverse merger – resulting in the private target company becoming a publicly traded company,” Lorenc said.
Growth stage companies, however, tend to prefer CPCs because SPACs are a more difficult path to doing well in public capital markets, according to Lorenc – larger companies do better with SPACs, to be sure, but growth stage companies find the CPC is better. More than 2,000 growth stage companies have used CPCs including in the TSXV, he added, and usually the participating firms have an enterprise value of less than $250 million (but not always.)
“For growth stage companies, a CPC provides a number of structural advantages over its SPAC counterpart,” Lorenc said. “Unlike a SPAC, which typically raises all of its capital upfront and allows its shareholders to redeem for cash – in recent years often in excess of 90% redemptions – CPCs typically only raise between $500,000 and $800,000,” he says.
While that fundraise amount is relatively small, for growth stage companies fundraise allows the company to get “runway” to find and close a reverse merger. Lorenc said this process “facilitates greater deal certainty, reduced dilution and greater influence for the target over its resulting capital structure.”
Across interviews with several directors, SpaceQ learned that Celestial Growth was formed in the fall of 2021 following years of discussion beforehand. The company has raised $712,500. The IPO brought in $500,000 and the remaining $212,500 came from a seed funding round with early backers, which includes Michal Prywata, the co-founder of Phantom Space.
If the fundraise target meets the senior TSX requirements, it is possible that Celestial Growth could migrate and uplist to the TSX after closing the reverse merger. “Canadian investors have a great deal of experience and understanding with risk capital – they have been financing exploration mining and drilling for decades,” noted director Mark Russell. “It is naturally a great environment to grow and scale using public venture capital.”
“A common path for hundreds of high growth companies is to list in Canada – where they can cut their teeth in a regulatory and finance environment that is more forgiving – and then once they are large enough [at about] $2 billion in market capitalization and have the experience to deal with the far more litigious environment, they will usually dual-list to a senior U.S. stock exchange to access further capital and liquidity,” Russell added.
“We also believe that our timing is pretty good, and is matched by recent inflection in investment activity in the sector. Further, the fallout from the experience of space tech companies with SPACs is that we are seeing interest in the CPC as an alternative, including from the United States.”
Summing up the sentiment of the directors, Gary Lifshits said the listing comes at what Celestial Growth sees as a “turning point” in the space economy.
“A focused deployment of efficient capital is not only necessary at this time, but is coupled to an observed growth in interest and coverage in the industry,” he said.
“To that end, we see Canada as particularly exciting to the industry as it has always been a pillar for resource development and scientific application to new challenges and industries, from developing oil and gas resources previously believed to be unrecoverable, to new scientific advancements in space technologies. We strongly believe that through our platform, we will shine a beacon on Canada and its public markets, and the role that it will play in the development of the space industry internationally.”
In 5 to 10 years, he added, the hope is financial professionals more broadly will be “fully invested” in space tech and that Celestial Growth’s platform will be an example of how to do that sort of investment successfully. Directors told SpaceQ that their team was assembled to look at different parts of a company’s strategy, including items like resource development, business strategy or technical review.
“We think that the next 18 months will be transformative in the Canadian capital markets landscape, particularly in the space industry,” CEO Bottoms added. “We are cautiously optimistic that over that period we will see several public listing transactions in Canada of exciting space tech companies.”